Growth, stability, returns
National Grid’s high visibility revenues, underwritten by regulatory returns across the UK and US, offer equity holders an attractive combination of asset growth and a 4.3% dividend yield. Both the UK and US businesses are well run. The UK business has predictability of revenues until the end of the current regulatory period in 2021 and is delivering returns ahead of OFGEM’s expected ‘base returns’. In the US, a rate filing programme is underway, which will result in enhanced returns in the years ahead. Now that the sale of the UK Gas Distribution is complete, management can continue to focus on delivering shareholder returns across its business units. Management targets 5-7% asset growth, and our fair value per share of 1,120p offers 11.2% upside versus current prices.National Grid is a holding company. Through its subsidiaries, Co. owns and operates regulated electricity and gas infrastructure networks in the U.K. and the U.S. Co. operates through five business segments: U.K. Electricity Transmission, U.K. Gas Transmission, U.K. Gas Distribution, U.S. Regulated, and Other Activities, primarily relating to non-regulated businesses and other commercial operations not included within the above segments, including: the Great Britain-France electricity interconnector; U.K. based gas metering activities; U.K. property management; a U.K. LNG import terminal; U.S. LNG operations; and U.S. unregulated transmission pipelines, together with corporate activities.
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